Suggest why net income increase while the cost of goods sold

Assignment Help Financial Accounting

Reference no: EM13940933

USING COMMON SIZE STATEMENTS

The following income statement and vertical analysis data are available for Willis Audio Products:

Willis Audio Products Comparative Statements of Income
	Year Ended June 30,
	2009	2008	2007
(in thousands)	Amount %	Amount %	Amount %
Sales	$4,122.0 100.0	$3,566.0 100.0	$2,965.0 100.0
Other income, net	39.7 1.0	36.7 1.0	21.3 0.7
Total revenues	$4,161.7 101.0	$3,602.7 101.0	$2,986.3 100.7
Costs and
expenses:
Cost of goods
sold	$1,893.6 45.9	$1,610.3 45.2	$1,310.8 44.2
Selling and
administrative	1,610.3 39.1	1,603.6 45.0	1,505.3 50.8
Interest	61.4 1.5	69.7 2.0	63.2 2.1
Total costs and
expenses	$3,565.3 86.5	$3,283.6 92.2	$2,879.3 97.1
Income before
income taxes	$ 596.4 14.5	$ 319.1 8.9	$ 107.0 3.6
Income taxes
expense	181.5 4.4	109.6 3.1	14.5 .5
Net income	$ 414.9 10.1	$ 209.5 5.9	$ 92.5 3.1

Required:

1. Suggest why net income increased from $92,500 to $414,900 while the cost of goods sold percentage increased each year and selling and administrative expenses remained nearly constant.

2. Explain what could cause sales toincrease while the gross margin percentage decreases.

Reference no: EM13940933

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